Pip value in gold trading

Pip value is how much money a one-pip move is worth for a given position. On gold it depends on two things: the contract size and what your platform calls a pip. With a 100-ounce lot, a $0.01 move (one point) is worth $1 and a $0.10 move is worth $10. Because the account is usually in dollars and gold is quoted in dollars, no currency conversion is needed.

How it applies to gold trading

Pip value turns a stop distance into a risk amount. If a trader places a stop $8 away on 0.30 lots, the risk is $8 × 100 × 0.30 = $240. Working backwards, if the planned risk is $240 and the stop is $8, the lot size is $240 ÷ ($8 × 100) = 0.30. Traders who know their pip value can do this arithmetic in seconds; those who do not tend to size by feel.

For accounts held in other currencies the pip value must be converted at the current exchange rate, which changes the risk slightly from day to day.

Platforms often display the tick value in the symbol specification; multiplying it by the number of ticks in the stop distance gives the same result as the formula and is a quick cross-check.

A common mistake

Using a forex pip value of about $10 per standard lot and assuming gold is the same. On gold, a $1 move is $100 per standard lot, so a “100-pip” stop could be $1 or $10 depending on the platform’s definition. Always state stops in dollars per ounce.

See also: Pip, Point, Position sizing, Lot.

Frequently asked questions